UNITED STATES

SECURITIES AND
   EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

[X] QUARTERLY REPORT
   PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF
   1934

FOR THE QUARTERLY PERIOD
   ENDED SEPTEMBER 30, 1999

[ ] TRANSITION REPORT
   PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF
   1934

FOR THE TRANSITION PERIOD
   FROM TO

________________

Commission File Number 0-23223

CURAGEN
   CORPORATION(Exact name of
   registrant as specified in its charter)



|Delaware                        |  | 06-1331400         
|------------------------------- |  | -------------------
|(State or other jurisdiction of |  | (I.R.S. Employer   
|incorporation or organization)  |  | Identification No.)

#### 

|555 Long Wharf Drive, 11th Floor, New Haven, Connecticut | 06511     
|-------------------------------------------------------- | ----------
|(Address of principal executive offices)                 | (Zip Code)
|                                                         |           

#### Registrant's
   telephone number, including area code: (203) 401-3330

Indicate by check mark
   whether the registrant (1) has filed all reports required to be
   filed by Section 13 or15(d) of the Securities Exchange Act of 1934 during the preceding 12
   months (or for such shorter period thatthe registrant was required to file such
   reports), and (2) has been subject to such filing requirements for
   thepast 90 days.

Yes [X]  No [  
   ]

The number of shares outstanding of the Registrant's
   Common Stock and Non-Voting Common Stock as of October 20, 1999 was
   15,880,827 and 977,636, respectively.







# 

# CURAGEN CORPORATION
 
 FORM 10-Q
 
 INDEX

|PART I. Financial Information | Page                                                                            
|----------------------------- | --------------------------------------------------------------------------------
|                              |                                                                                 
|Item 1.                       | Financial Statements                                                            
|                              |                                                                                 
|                              | Condensed Balance Sheets,                                                       
|                              | September 30, 1999 (unaudited) and December 31, 1998                            
|                              |                                                                                 
|                              | Condensed Statements of Operations,                                             
|                              | for the Three and Nine Months Ended September 30,
     1999 and 1998 (unaudited)
|                              |                                                                                 
|                              | Condensed Statements of Cash Flows,                                             
|                              | for the Nine Months Ended September 30, 1999 and
     1998 (unaudited)          
|                              |                                                                                 
|                              | Notes to Condensed Financial Statements (unaudited)                             
|                              |                                                                                 
|Item 2.                       | Management's Discussion and Analysis of Financial                               
|                              | Condition and Results of Operations                                             
|                              |                                                                                 
|PART II. Other Information    |                                                                                 
|                             
|Item 2.                       | Changes in Securities and Use of Proceeds                                       
|                             
|Item 6.                       | Exhibits and Reports on Form 8-K                                                
|                              |                                                                                 
|Signatures                    |                                                                                 
|                              |                                                                                 
|Exhibit Index                 |                                                                                 



|CURAGEN
     CORPORATION
   
   CONDENSED BALANCE SHEETS
|--------------------------------------------------------

|                                                                            | September 30,
   
   1999 | December 31,
   
   1998
|--------------------------------------------------------------------------- | ------------------------- | ------------------------
|
|
|ASSETS                                                                      |                           |                         
|Current assets:                                                             |                          
|Cash and cash equivalents                                                   |                           | $ 40,974,938            
|Grants receivable                                                           |                           | 116,484                 
|Accounts receivable                                                         |                           | 13,400                  
|Other current assets                                                        |                           | 59,667                  
|Prepaid expenses                                                            |                           | 453,028                 
|                                                                            |                           |                         
|Total current assets                                                        |                           | 41,617,517              
|                                                                            |                           |                         
|                                                                            |                           |                         
|                                                                            |                           |                         
|Property and equipment, net                                                 |                           | 16,877,285              
|Notes receivable - related parties                                          |                           | 95,000                  
|Other assets                                                                |                           | 377,357                 
|                                                                            |                           |                         
|Total assets                                                                |                           | $ 58,967,159            
|                                                                            |                           |                         
|LIABILITIES AND STOCKHOLDERS' EQUITY                                        |                           |                         
|Current liabilities:                                                        |                          
|Accounts payable                                                            |                           | $   1,473,177           
|Accrued bonuses                                                             |                           | 610,874                 
|Accrued expenses                                                            |                           | 824,959                 
|Accrued payroll                                                             |                           | 284,189                 
|Deferred revenue                                                            |                           | 3,815,613               
|Deferred rent                                                               |                           | 103,406                 
|Current portion of obligations
     under capital leases                    |                           | 2,740,419               
|                                                                            |                           |                         
|Total current
     liabilities                                              |                           | 9,852,637               
|                                                                            |                           |                         
|Long-term liabilities:                                                      |                          
|Deferred rent, net of current
     portion                                  |                           | 118,940                 
|Interest payable                                                            |                           | 21,000                  
|Obligations under capital
     leases, net of current portion               |                           | 8,311,398               
|                                                                            |                           |                         
|Total long-term
     liabilities                                            |                           | 8,451,338               
|                                                                            |                           |                         
|Commitments and contingencies                                               |                          
|                                                                            |                          
|Stockholders' equity:                                                       |                          
|Common Stock; $.01 par value,
     issued and outstanding 15,268,105 shares |                          
|at September
     30, 1999, and 13,316,757 shares at December 31, 1998      |                           | 152,681                 
|Additional paid-in capital                                                  |                           | 88,093,014              
|Accumulated deficit                                                         |                           | (47,218,971             
|Unamortized
     stock-based compensation                                   |                           | (363,540                
|                                                                            |                           |                         
|Total stockholders'
     equity                                             |                           | 40,663,184              
|                                                                            |                           |                         
|Total
     liabilities and stockholders' equity                             |                           | $ 58,967,159            
|                                                                            |                           |                         

See accompanying notes to condensed
   financial statements.


|CURAGEN CORPORATION
   
   CONDENSED STATEMENTS OF OPERATIONS(unaudited)
|------------------------------------------------------------------------

|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|

See accompanying notes to condensed
     financial statements.

# 

# 

|CURAGEN CORPORATION                                             
|----------------------------------------------------------------
|CONDENSED
       STATEMENTS OF CASH FLOWS
     
     (unaudited)
|                                                                

# 



|                                                                 | Nine Months Ended
     
     September 30, |               
|---------------------------------------------------------------- | ------------------------------------------ | --------------
|
|Cash flows from operating
       activities:                     |                                            |               
|Net loss                                                         |                                            | $(18,279,463  
|Adjustments to reconcile net loss to net
       cash             |                                           
|used in operating
       activities:                             |                                           
|Depreciation and amortization                                    |                                            | 4,279,931     
|Non-monetary compensation                                        |                                            | 420,343       
|Stock-based 401(k) Employer Plan Match                           |                                            | 97,322        
|Changes in assets and liabilities:                               |                                           
|Grants receivable                                                |                                            | 483,760       
|Accounts receivable                                              |                                            | (2,202        
|Prepaid expenses                                                 |                                            | 40,409        
|Other current assets                                             |                                            | (46,752       
|Other assets                                                     |                                            | (56,222       
|Accounts payable                                                 |                                            | (1,304,823    
|Accrued bonuses                                                  |                                            | (230,513      
|Accrued expenses                                                 |                                            | 344,508       
|Accrued payroll                                                  |                                            | (40,734       
|Deferred revenue                                                 |                                            | (1,059,389    
|Deferred rent                                                    |                                            | (77,553       
|                                                                 |                                            |               
|Net cash used in operating activities                            |                                            | (15,431,378   
|                                                                 |                                            |               
|                                                                 |                                           
|Cash flows from investing activities
       :                    |                                           
|Acquisitions of property and equipment                           |                                            | (5,179,339    
|Notes receivable - related parties                               |                                            | (2,298        
|                                                                 |                                            |               
|Net cash used in investing activities                            |                                            | (5,181,637    
|                                                                 |                                            |               
|                                                                 |                                           
|Cash flows from financing activities:                            |                                           
|Payments on capital lease obligations                            |                                            | (1,922,541    
|Redemption of Series B Preferred Stock                           |                                            | --            
|Proceeds from issuance of Common Stock                           |                                            | 15,000,000    
|Proceeds from exercise of employee stock options                 |                                            | 979,463       
|Proceeds from sale-leaseback of equipment                        |                                            | 4,253,535     
|Proceeds from sale of fixed assets                               |                                            | 1,001         
|Payments of stock issuance costs                                 |                                            | (17,500       
|                                                                 |                                            |               
|Net cash provided by financing activities                        |                                            | 18,293,958    
|                                                                 |                                            |               
|Net (decrease) increase in cash and cash
       equivalents      |                                            | (2,319,057    
|Cash and cash equivalents, beginning of
       period            |                                            | 43,293,995    
|                                                                 |                                            |               
|Cash and cash equivalents, end of period                         |                                            | $ 40,974,938  
|                                                                 |                                            |               
|Supplemental cash flow information:                              |                                           
|Interest paid                                                    |                                            | $      860,361
|                                                                 |                                            |               
|Supplemental schedule of
       non-cash financing transactions: |                                           
|Obligations under capital leases                                 |                                            | $   4,253,535 
|                                                                 |                                            |               

See accompanying notes to condensed
     financial statements.







CURAGEN CORPORATION

NOTES TO CONDENSED
     FINANCIAL STATEMENTS(unaudited)

1. Basis of Presentation

> The accompanying
>      unaudited condensed financial statements have been prepared in
>      accordance with generally accepted accounting principles for
>      interim financial information and with the instructions to Form
>      10-Q and Article 10 of Regulation S-X. Accordingly, they do not
>      include all of the information and footnotes required by generally
>      accepted accounting principles for complete financial statements.
>      In the opinion of the Company's management, the accompanying
>      unaudited condensed financial statements include all adjustments,
>      consisting of only normal recurring accruals, necessary to present
>      fairly the financial position, results of operations and cash
>      flows of the Company. Interim results are not necessarily
>      indicative of the results that may be expected for the entire year.
>    The accompanying condensed financial
>      statements should be read in conjunction with the audited
>      financial statements and notes thereto included in the Company's
>      Annual Report on Form 10-K for the year ended December 31, 1998.

2. Private Placement

> In September 1999, the
>      Company completed a private placement of 1,500,000 shares of
>      unregistered Common Stock for an aggregate purchase price of
>      $15,000,000 to Pequot Partners Fund, L.P. and Pequot International
>      Fund, Inc.

3. Subsequent Events

> Drawdown and
>      Conversion of Loan Facilities Provided by Collaborators
>    On October 15, 1999, the Company
>      exercised its right under existing collaborative agreements with
>      Biogen, Inc. ("Biogen") and Genentech, Inc. ("
>      Genentech") to borrow an aggregate of $26 million.
>      Simultaneous with these loan drawdowns, the Company converted the
>      loan from Biogen into 611,022 shares of the Company's Common
>      Stock, par value $.01 per share, and converted the loan from
>      Genentech into 977,636 shares of the Company's Non-Voting Common
>      Stock, par value $.01 per share. On or before November 4, 1999,
>      the Company intends to file a registration statement registering
>      the resale of the 611,022 shares of Common Stock issued to Biogen
>      and the 977,636 shares of Common Stock that is issuable upon the
>      conversion of the 977,636 shares of Non-Voting Common Stock issued
>      to Genentech. The registration of such shares is required under
>      the collaborative agreements with Biogen and Genentech. Certain
>      other stockholders of the Company have the right to participate in
>      the registration.
>    Asset Impairment
>    In November 1999, the Company bought back leased laboratory
>      equipment from Transamerica Business Credit Corporation, the
>      original lessor. The Company intends to discontinue the use of
>      this equipment in its research and development processes by
>      December 31, 1999, and is pursuing plans to replace the equipment
>      shortly thereafter. During the fourth quarter of 1999, the Company
>      will record a loss on impairment related to this leased equipment
>      of approximately $2.7 million, in order to properly reflect the
>      Company's estimate of the fair market value of the retired
>      laboratory equipment in accordance with Statement of Financial
>      Accounting Standards No. 121 (Accounting for the Impairment of
>      Long-Lived Assets and for Long-Lived Assets to Be Disposed Of).

6



CURAGEN CORPORATIONMANAGEMENT'S DISCUSSION
     AND ANALYSISOF FINANCIAL CONDITION
     AND RESULTS OF OPERATIONS

This Management's Discussion and
     Analysis of Financial Condition and Results of Operations as of
     September 30, 1999 and for the three and nine month periods ended
     September 30, 1999 and 1998 should be read in conjunction with the
     sections of the Company's audited financial statements and notes
     thereto as well as the Company's "Management's Discussion and
     Analysis of Financial Condition and Results of Operations"that are included in the Company's Annual Report on Form 10-K
     for the year ended December 31, 1998.

#### Overview

CuraGen Corporation (the "Company"
     or "CuraGen") is a biotechnology company focusing on the
     application of genomics to the systematic discovery of genes,
     biological pathways and drug candidates in order to accelerate the
     discovery and development of the next generation of therapeutic,
     agricultural and diagnostic products. The Company was incorporated
     in November 1991 and, until March 1993, was engaged primarily in
     organizational activities, research and development of the
     Company's technology, grant preparation and obtaining financing.
     The Company has incurred losses since inception, principally as a
     result of research and development and general and administrative
     expenses in support of its operations. As of September 30, 1999,
     the Company had an accumulated deficit of $47,218,971. The Company
     anticipates incurring additional losses over at least the next
     several years as it expands its internal and collaborative gene
     discovery efforts, continues development of its technology and
     expands its operations. The Company expects that losses will
     fluctuate from quarter to quarter and that such fluctuations may
     be substantial.

Results of Operations

Three and Nine Months Ended September 30,
     1999 and 1998

Revenue. Revenue for the three and nine
     months ended September 30, 1999 was $4,311,737 and $10,316,367,
     respectively, an increase of $2,003,722 and $3,303,154, or 87% and
     47%, respectively, as compared to $2,308,015 and $7,013,213 for
     the corresponding periods in 1998. The increases were largely due
     to additional collaboration revenue recorded during 1999, under
     the Company's arrangements with Glaxo Wellcome, Inc.,Hoffmann-La Roche Inc., Roche Vitamins Inc.,andCOR Therapeutics, Inc.offset by a
     decrease in grant revenue due to the completion of two federal
     grants during the first and second quarters of 1999. The Company
     expects future revenues will continue to increase as additional
     collaborative arrangements are signed.

Revenue recognized under the Company's
     collaborative arrangements is generally based upon work performed
     on behalf of collaborators by CuraGen employees, or based upon the
     attainment of certain benchmarks specified in the related
     agreements. The Company is currently negotiating to restructure
     one of its collaborative arrangements, and may consider
     restructuring other arrangements in the future, to recognize
     revenue based upon work performed on a per project basis, rather
     than on a per employee basis. The company does not anticipate such
     restructurings of collaborative arrangements would have a material
     impact on its future revenues.

Operating Expenses. Grant research
     expenses for the three and nine months ended September 30, 1999 of
     $0 and $417,386 represented a decrease of $362,856 and $1,053,169,
     or 100% and 72%, respectively, compared to $362,856 and $1,470,555
     for the three and nine months ended September 30, 1998. The
     decrease in grant research expenses was attributable to the
     completion of the Company's federal grants during the first and
     second quarters of 1999.As a
     result of the completion of such federal grants, the Company
     foresees no additional grant research expenses in future periods,
     unless additional grant awards are received.

Collaborative research and development
     expenses for the three and nine months ended September 30, 1999
     were $6,155,158 and $19,073,857, respectively, compared to
     $4,822,701 and $11,618,778 for the three and nine months ended
     September 30, 1998. The increases of $1,332,457 and $7,455,079 for
     the three and nine months ended September 30, 1999, respectively,
     or 28% and 64%, respectively, were primarily attributable to the
     Company's obligations to fulfill research requirements under new
     and existing collaborations, in addition to internal research
     efforts, which resulted in increased purchases of laboratory
     supplies, increased equipment depreciation and facilities
     expenses, and additional personnel costs. Future collaborative
     research and development expenses are expected to
   increase as additional personnel are hired and research and
     development facilities are expanded to accommodate the Company's
     collaborations and internal research.

General and administrative expenses
     for the three months ended September 30, 1999 increased 59% to
     $3,402,610 as compared to $2,144,338 for the three months ended
     September 30, 1998. For the nine months ended September 30, 1999
     and 1998, general and administrative expenses were $9,614,495 and
     $5,219,955, respectively, an increase of $4,394,540 or 84%. The
     increases were primarily attributable to the expansion of
     administration facilities, increasing payroll costs and the
     incurrence of related depreciation expense and legal expenses in
     support of developing the Company's intellectual property
     portfolios. Over the next several years, the Company anticipates
     percentage increases in general and administrative expenses will
     be proportionate to percentage increases in collaborative research
     and development expenses.

Interest Income, Net. Net
     interest income for the three months ended September 30, 1999 of
     $98,638 decreased $411,557, or 81%, compared to $510,195 for the
     same period in 1998. For the nine months ended September 30, 1999,
     net interest income of $509,908 decreased $607,952, or 54%, as
     compared to net interest income of $1,117,860 for the
     corresponding period in 1998. The decreases were primarily due to
     the lower balances held in the Company's cash and cash equivalent
     accounts, and additional interest expense paid on capital lease
     obligations. The Company anticipates that net interest income will
     increase in the future, due to higher cash and cash equivalent
     balances as a result of funds received from the Company's recent
     private placement with Pequot Partners Fund, L.P. and Pequot
     International Fund, Inc. (collectively "Pequot"), and
     from the Company's recent drawdown and simultaneous conversion of
     loans from Biogen, Inc. ("Biogen") and Genentech, Inc. (
     "Genentech"), offset by the expected increase in capital
     lease obligations.

Net Loss Attributable to Common
     Stockholders. For the three months ended September 30, 1999,
     the Company reported a net loss attributable to common
     stockholders of $5,147,393 or $0.37 per share, as compared to
     $4,511,685 or $0.34 per share for the third quarter of 1998. Since
     inception, the Company has incurred operating losses, and as of
     September 30, 1999, had an accumulated deficit of $47,218,971 and
     therefore, has not paid any federal income taxes. Realization of
     deferred tax assets is dependent on future earnings, if any, the
     timing and amount of which are uncertain. Accordingly, valuation
     allowances in amounts equal to the deferred income tax assets have
     been established to reflect these uncertainties in all periods
     presented.

Liquidity and Capital Resources

As of September 30, 1999, the
     Company had $40.9 million in cash and cash equivalents, compared
     to $43.3 million as of December 31, 1998. This decrease represents
     the utilization of funds for payment of laboratory facilities,
     supplies and payroll costs to support internal and collaborative
     research processes, offset by the receipt of proceeds from the
     private placement with Pequot. The Company has financed its
     operations since inception primarily through its initial public
     offering of Common Stock, collaborative research and development
     arrangements, private placements of equity securities, government
     grants, and capital leases. As of September 30, 1999, the Company
     had recognized $31,753,496 of cumulative sponsored research
     revenues from government grants and collaborative research
     arrangements. To date, inflation has not had a material effect on
     the Company's business.

In October 1999, the Company
     exercised its right under existing collaborative agreements with
     Biogen and Genentech to borrow an aggregate of $26 million to
     support on-going operating activities. Simultaneous with these
     loan drawdowns, the Company converted the loan from Biogen into
     611,022 shares of the Company's Common Stock, and converted the
     loan from Genentech into 977,636 shares of the Company's
     Non-Voting Common Stock. On or before November 4, 1999, the
     Company intends to file a registration statement registering the
     resale of the 611,022 shares of Common Stock issued to Biogen and
     the 977,636 shares of Common Stock that is issuable upon the
     conversion of the 977,636 shares of Non-Voting Common Stock issued
     to Genentech. The registration of such shares is required under
     the collaborative agreements with Biogen and Genentech. Certain
     other stockholders of the Company have the right to participate in
     the registration.

In November 1999, the Company bought back leased
     laboratory equipment from Transamerica Business Credit
     Corporation, the original lessor. The Company intends to
     discontinue the use of this equipment in its research and
     development processes by December 31, 1999, and is pursuing plans
     to replace the equipment shortly thereafter. During the fourth
     quarter of 1999, the Company will record a loss on impairment
     related to this leased equipment of approximately $2.7 million, in
     order to properly reflect the Company's estimate of the fair
     market value of the retired laboratory equipment in accordance
     with Statement of Financial Accounting Standards No. 121
     (Accounting for the Impairment of Long-Lived Assets and for
     Long-Lived Assets to Be Disposed Of).

The Company's investing activities have
     consisted primarily of acquisitions of equipment and expenditures
     for leasehold improvements. At September 30, 1999, the Company's
     gross investment in equipment, computers and leasehold
     improvements since inception was $25,276,503. At September 30,
     1999, equipment with a gross book value of $14,142,892 secures the
     Company's equipment financing facility for equipment and tenant
     improvements in support of the laboratory expansions at the New
     Haven, Connecticut, Branford, Connecticut and Alachua, Florida
     locations. The Company had no material commitments for capital
     expenditures at September 30, 1999.

Net cash used in operating
     activities was $15,431,378 for the nine months ended September 30,
     1999, compared to $7,484,389 for the same period ended September
     30, 1998. Cash outflows for operating activities for the nine
     months ended September 30, 1999 primarily included payments to
     vendors, depreciation expense and increased net loss. Cash
     outflows for financing activities during the nine months ended
     September 30, 1999 primarily included payments on capital lease
     obligations, while cash inflows primarily included proceeds from
     employee stock option exercises and the Company's recent private
     placement with Pequot.

At September 30, 1999,
     the Company had federal and Connecticut net operating loss
     carryforwards for income tax purposes of approximately
     $48,700,000. Federal net operating loss carryforwards expire
     beginning in 2008, and Connecticut net operating loss
     carryforwards began expiring in 1998. The Company also has federal
     and Connecticut research and development tax credit carryforwards
     for income tax purposes of approximately $2,300,000 and
     $3,200,000, respectively, at September 30, 1999.

Year 2000 Compliance

The "Year 2000 Problem" arose
     because many existing computer programs use only the last two
     digits to refer to a year. Therefore, these computer programs may
     recognize a year that ends in "00" as the Year 1900
     rather than the Year 2000. This could result in a significant
     disruption of operations and an inability to process certain
     transactions.

Strategic Plan

Early in 1998, upon going public,
     the Company assessed its internal computer systems and its
     non-information technology systems. The Company determined that
     because its computer applications use four digits to identify a
     year in the field date, the Company's internal computer systems
     are internally compliant with Year 2000 requirements. With respect
     to material non-information technology systems, the Company
     determined that substantially all of these systems were provided
     by third parties.

The Company has developed a
     strategic plan to estimate the potential risks related to third
     parties with which it has significant relationships. These third
     parties include collaborative partners, financial institutions,
     vendors, payroll service providers, utility companies, granting
     agencies and providers non-information technology systems.

The Company has distributed inquiry
     letters to the third party providers and evaluated the responses
     received. In addition, the Company has reviewed public statements
     or web sites of some of the third parties. The Company has
     determined, based solely on this review, that approximately 85% of
     the third parties are fully compliant and approximately 15% are
     still in the process of becoming compliant. Of the 15% still in
     the process of becoming compliant, the Company considers
     approximately half to be material to the continuation of the
     Company's daily operations and not able to be easily replaced
     prior to December 31, 1999. The Company will continue to monitor
     their progress, either through direct discussions, written
     inquiries or a review of their public statements or web sites.

Costs

There have been no material
     historical costs incurred to date by the Company related to Year
     2000 compliance. While the Company cannot predict what impact the
     Year 2000 problem of third parties may have on it, the Company
     does not currently believe that it will incur material costs in
     resolving Year 2000 problems of third parties with whom it
     interacts. However, in the event that any of the third parties
     that the Company cannot replace encounter Year 2000 problems, the
     Company may incur material costs in resolving these Year 2000
     problems.

9



Risks

The Company has assessed the
     potential risks associated with non-compliance of its external
     third parties, 15% of whom are still in the process of evaluating
     their Year 2000 compliance status, and concluded that the Year
     2000 issues will not have a material effect on the continuation of
     its normal daily operations. However, this conclusion is based on
     a variety of factors and assumptions, some of which are beyond the
     Company's control.For instance, some
     third parties may have incorrectly concluded that they are or will
     be Year 2000 compliant. In addition, the Company may be unable to
     replace third parties that it thought it could replace. Further,
     the Company and such third parties may not have anticipated all of
     the problems that the Year 2000 issue may generate. If the Company
     or any of these third parties encounter Year 2000 problems, they
     could have a significant impact on the Company's ability to
     effectively continue its normal daily operations.

Contingency Plan

At the present time, the Company
     does not believe that a contingency plan is necessary.

Certain Factors That May Affect
     Results of Operations

This report may contain
     forward-looking statements that are subject to certain risks and
     uncertainties. These statements include statements regarding the
     expected future levels of losses, potential quarterly fluctuations
     in the levels of losses, the Company's ability to structure some
     of its future collaborations so that fees thereunder are recorded
     on a per project basis, the expected future increases in
     collaboration revenues, net interest income, capital lease
     obligations, collaborative research and development and general
     and administrative expenses, as well as the Company's Year 2000
     readiness and the Year 2000 readiness of third parties with whom
     the Company has relationships. Such statements are based on
     management's current expectations and are subject to a number of
     factors and uncertainties that could cause actual results to
     differ materially from those described in the forward-looking
     statements. The Company cautions investors that there can be no
     assurance that actual results or business conditions will not
     differ materially from those projected or suggested in such
     forward-looking statements as a result of various factors,
     including, but not limited to, the following: the Company's early
     stage of development, technological uncertainty and product
     development risks, uncertainty of additional funding, reliance on
     research collaborations, competition, the Company's ability to
     protect its patents and proprietary rights, uncertainties relating
     to commercialization rights and the Company's ability to
     renegotiate collaborations with partners on terms acceptable to
     it. For further information, refer to the more specific risks and
     uncertainties discussed throughout this discussion and analysis.

10



Part II - Other
     Information

Item 2. Changes in Securities and
     Use of Proceeds

In connection with the Company's
     initial public offering, the Company sold 3,275,000 shares of its
     Common Stock and received net offering proceeds of $33,160,350. On
     March 17, 1998, the Securities and Exchange Commission declared
     the Company's Registration Statement on Form S-1 (File No.
     333-38051) effective.

The following table sets forth the
     Company's cumulative use of net offering proceeds as of September
     30, 1999:





The foregoing use of net offering
     proceeds does not represent a material change in the use of
     proceeds described in the Registration Statement.

On September 7, 1999, the Company
     sold an aggregate of 1,500,000 shares of its Common Stock, in a
     private placement, to Pequot Partners Fund, L.P. and Pequot
     International Fund, Inc. (collectively "Pequot") for an
     aggregate purchase price of $15,000,000. No underwriters were
     involved in the foregoing offer and sale of securities. Such offer
     and sale was made in reliance upon an exemption from the
     registration provisions of the Securities Act of 1933, as amended
     (the "Securities Act"), set forth in Section 4(2)
     thereof relative to sales by an issuer not involving any public
     offering or the rules and regulations thereunder. The offer and
     sale was made only to "accredited investors" as such
     term is defined in the Regulation D under the Securities Act and
     the Company did not partake in any general solicitation or
     advertisement. All of the foregoing shares of Common Stock are
     deemed restricted securities for purposes of the Securities Act.
     Pequot has agreed not to dispose of its shares until March 8,
     2000. Thereafter, Pequot has demand and piggyback registration
     rights.

Item 6. Exhibits and Reports on
     Form 8-K



11

SIGNATURES


Pursuant to the requirements of the
     Securities Exchange Act of 1934, the registrant has duly caused
     this report to be signed on its behalf by the undersigned
     thereunto duly authorized.







|Dated: November 2,
       1999 |  | CuraGen Corporation                                       
|------------------------------ |  | ----------------------------------------------------------
|                               |  |                                                           
|                               |  | By: /s/ Jonathan
       M. Rothberg, Ph.D.                
|                               |  | Jonathan M. Rothberg,
       Ph.D.                        
|                               |  | Chief Executive
       Officer, President and             
|                               |  | Chairman of the Board                                     
|                               |  |                                                           
|                               |  |                                                           
|                               |  | By: /s/ David M.
       Wurzer                            
|                               |  | David M. Wurzer                                           
|                               |  | Executive
       Vice-President, Treasurer                
|                               |  | and Chief Financial
       Officer, (principal            
|                               |  | financial and
       accounting officer of the registrant)

12



CURAGEN CORPORATION

EXHIBIT INDEX

|No.  |                                                                                                   
|---- | --------------------------------------------------------------------------------------------------
|     |                                                                                                   
|10.1 | Letter
       Agreement with Pequot Partners Fund, L.P. and Pequot
       International Fund, Inc.
|     |                                                                                                   
|11   | Computation of Net
       Loss Per Share Attributable to Common Stockholders                      
|     |                                                                                                   
|27   | Financial Data
       Schedule                                                                    

#### 13